Background  

On March 31, 2009, the FAR Council issued five interim Federal Acquisition Regulation (FAR) rules that implement several requirements mandated by the American Recovery and Reinvestment Act of 2009 (Recovery Act), more commonly known as the stimulus plan.1 Although each of the interim rules became effective as of March 31, the FAR Council will consider comments submitted by June 1, 2009, in formulating the final rules.  

The interim FAR rules only apply to federal procurement contracts funded with stimulus money. The FAR rules do not apply to grants, cooperative agreements, or federal financial assistance provided to state and local governments to fund stimulus projects. However, non-procurement stimulus projects are subject to the Updated Implementing Guidance for implementation of the stimulus plan issued by the Office of Management and Budget on April 3, 2009, as well as rules and policies issued by individual sponsoring agencies. The Implementing Guidelines generally impose requirements on non-procurement stimulus projects that are similar to those imposed by the new FAR rules.  

The following describes each of the interim FAR rules that implement the stimulus plan:  

Publicizing Contract Actions Funded By the Stimulus Plan. The first interim rule requires contracting officers to enter data in the Federal Procurement Data System for any contract action funded in whole or in part by the stimulus plan.2 The rule will also require contracting officers to post the following on the FedBizOpps.gov Web site for any covered contract action:  

  1. identification of an action as funded by the stimulus plan;
  2. pre-award notices for orders exceeding $25,000 for “informational purposes only;”  
  3. a description of supplies and services (including construction) in a narrative that is “clear and unambiguous to the general public;” and  
  4. a rationale for awarding any action (including modifications and task and delivery orders) that is not both fixed-price and awarded through competitive procedures.

Reporting Requirements. The second interim FAR rule requires contractors who receive stimulus funds to file quarterly reports documenting their use of stimulus funds.3 A new contract clause will require the prime contractor to report the following information:  

  1. the contract and order number;
  2. the amount of stimulus funds invoiced by the contractor for the reporting period;  
  3. a list of significant supplies delivered or services performed;  
  4. an assessment of the contractor’s progress on the contract (e.g., percentage completion);  
  5. the employment impact of the contract, including an estimate of the number of jobs created and retained as a result of the stimulus funds;  
  6. the names and total compensation of the five most highly compensated officers of the contractor for the calendar year in which the contract is awarded if the contractor receives 80 percent and $25 million or more of its annual gross revenues from federal awards and the public does not have access to the information through periodic reports filed with the Securities and Exchange Commission or the Internal Revenue Service; and  
  7. detailed information on first-tier subcontracts.  

The information disclosed in these reports will be made available to the public on the Recovery Act Web site. This new FAR clause must be included in all contracts receiving stimulus funds, including existing contracts.  

Whistleblower Protections. Another interim rule implements the Recovery Act requirements to provide additional protections for state, local, and government contractor whistleblowers.4 Specifically, the new FAR clause prohibits a non-federal employer receiving stimulus funds from discharging, demoting, or otherwise discriminating against an employee as a reprisal for making a disclosure of what the employee reasonably believes to be evidence of gross mismanagement, misuse, or waste of stimulus funds or a violation of law related to a contract involving stimulus funds. The rights and remedies provided by the stimulus plan are enforceable in a court of law. In addition, the clause imposes an affirmative obligation on contractors receiving stimulus funds to post a notice of their employees’ rights and remedies for whistleblower protections provided under the Recovery Act. The new FAR clause will be included in all contracts and subcontracts funded under the stimulus plan, including contracts at or below the simplified acquisition threshold, commercial-item contracts, and commercially available off-the-shelf, or COTS, item contracts.  

Audit Authority and Access to Subcontractors and Employees. In the stimulus plan, Congress called for heightened transparency and accountability through the use of contract reviews and audits to “prevent the fraud, waste, and abuse” of stimulus funds. Implementing specific direction in the Recovery Act, one of the interim rules amends the FAR to provide new authorities to the Comptroller General, or Government Accountability Office (GAO), and agency inspector generals (IGs).5 For FAR Part 12, Part 14, and Part 15 contracts funded by the stimulus plan, including those below the simplified acquisition threshold, GAO and agency IGs are authorized to audit prime contracts and subcontracts and interview prime contractor personnel, and GAO is authorized to interview subcontractor personnel.6 Notably, the stimulus plan does not grant agency IGs the authority to interview subcontractor employees.7  

A separate interim rule issued at the same time authorizes the Comptroller General to interview current contractor employees when conducting audits regardless of whether the contract is funded by the stimulus plan.8 The rule, however, does not extend to commercial-item contracts, and thus, commercial-item contracts that are not funded by the stimulus plan will not be subject to new oversight authority.  

Buy American Requirements for Construction.9 Finally, another interim rule implements the Buy American requirements for federal buildings and public works funded by the stimulus plan. Hogan & Hartson summarized the rule in detail in this Government Contracts Update (April 3, 2009). In short, the interim rule prohibits, with certain exceptions, the use of stimulus funds for any project for the construction, alteration, maintenance, or repair of a public building or public work unless all of the iron, steel, and manufactured goods used in the project are produced in the United States.  

Conclusion  

The stimulus plan and the interim FAR regulations impose several new compliance obligations on contractors, including reporting requirements and the requirement to post notices of whistleblower protections. The reporting requirements, along with the agency obligation to publicize contract actions funded by the stimulus plan, are intended to improve transparency. The new and pre-existing compliance obligations that apply to contracts funded with stimulus money will be of heightened importance in light of the increased authority and funding provided to GAO and the agency IGs to perform oversight functions. This combination of new requirements and heightened oversight will mark a significant change in the compliance environment faced by government contractors and could potentially expose contractors to additional liability risks.